Higher Rate SDLT as an Executor/Beneficiary

[David (UK)]

My father died suddenly, shortly after having sold his main (only) residence and Exchanged contracts for the purchase of a new long leasehold flat. However this sale had not Completed by the time of his death, and as the Executor of his estate I had to acquire a limited Grant of Probate to complete the purchase on his behalf. Clearly a fairly unusual scenario.

I now understand HMRC expect me to pay Higher Rate SDLT on this transaction given I, and the two other beneficiaries of my father's will, already own properties. This is even given none of the beneficiaries will immedaitely qualfiy to live in the flat as it is exclusively for over 55's (and cannot be rented without Freeholder Consent, for which there is no precedent). The flat will be sold immediately a full Grant of Probate is recieved.

Does this seem correct? On what basis doHMRC make this determination? I ask as they themsleves wont seemingly provide direct advice on this matter given SDLT is "self-assessed". Many thanks.

[maths]

I would have thought that the number of properties owned by you personally should not be of relevance in ascertaining any SDLT charge on the purchase qua Executor.

This assumes that the purchase contract was not assented to you qua beneficiary prior to "completion" on the purchase.

[bd6759]

It's an unusual situation because there is no requirement for the purchase to complete in these circumstances.

A deceased person cannot take an interest in a property, and the contract cannot require anyone else to assume the interest. With that in mind, and given that no-one really wants the property, why did you complete?

If you have completed, you must have assumed the interest in the contract and will, unfortunately, be liable to the higher rate.

[maths]

If the Executors did not complete the transaction the vendor could apply for specific performance by the Executors.

Failure to complete on the part of the Executors is likely to lead to a claim for damages.

Specific performance is available to both vendor and purchaser.

[SDLT Geek]

I agree with maths about the enforceability of a land sale contract against the estate of a deceased person.

I did look up before about the SDLT position where executors buy a property. I recall I concluded that the estate counts as a "settlement" for the purposes of FA03/Sch4ZA/para13 so that the 3% surcharge is likely to be due under Sch4ZA/para4 (rather then the more familiar para3). Para 4 applies where the purchaser is not an individual and it can impose the 3% surcharge even where the purchaser has no other property (there is no equivalent of Condition C which applies for para3).

[bd6759]

I do not agree that acting as an executor creates any sort of settlement. If anything, they are acting as bare trustees on behalf of the deceased. In that case the bare trust is ignored and the deceased is deemed to be the purchaser and the HRAD will not apply.

I am not convinced that the purchase was necessary, but that is water under the bridge at this stage. I agree with maths that if purchased in the capacity as exector (and not as beneficiary) the HRAD does not apply.

[SDLT Geek]

The definition of "settlement" for SDLT is very wide, see FA2003/Sch16/para1. It is any kind of trust that is not a bare trust. My understanding is that the personal representatives of a deceased person do hold the assets on trust, but not on a bare trust for any person (and not on a bare trust for the deceased).

[maths]

I should have gone on to say in my original post that, as Geek points out, para 4 gives rise to a higher rate transaction without further requirements.

A deceased's estate would not normally fall to be treated as settlement which i would suggest is the position here unless specific provision to this effect appears somewhere in the SDLT legislation.

[David (UK)]

Thanks very much for the responses; they’ve given me several lines to explore.

What do you make of this, particularly the last line (FA03/S106):

“The personal representatives of a person who is the purchaser under a land transaction—
(a)are responsible for discharging the obligations of the purchaser under this Part in relation to the transaction, and
(b)may deduct any payment made by them under this Part out of the assets and effects of the deceased person.”

[maths]

The section to which you refer is designed to make it clear that the PRs have certain obligations (e.g. paying any SDLT due on purchase; filing relevant forms etc) where they are purchasers as in your case.

Where any funds of the estate are used to effect the purchase the PRs are authorised to effectively obtain a refund out of the estate's assets.